Visakhapatnam, Aug. 26: Vizag Steel Plant (VSP), the second-largest profit making steel company in the country, hopes to make a profit of Rs 1000 crore during the current fiscal against a net profit of Rs 450 crore in 2002-03.
The company also plans to ask the government for an equity restructuring before it goes in for the expansion programme next year.
Talking to The Telegraph, VSP chairman B. K. Panda said, “The company is going to be debt-free in September this year after the redemption of Rs 120 crore worth of bond carrying a 16 per cent coupon rate.
“But a large equity base may not be a very attractive proposition when the company goes in for borrowing needed for the expansion,” he said.
The company’s current equity is around Rs 7,800 crore after the restructuring in 1998.
“Our original equity was Rs 3,200 crore. But we cannot go back to the earlier level immediately because the accumulated losses need to be covered up,” he explained.
Panda, however, sounds optimistic about the company’s future profitability because of the heavy market demand and good net sales realisation.
“In the first four months, our provisional profit figure is Rs 267 crore. But in the steel industry the last two quarters are always better both in terms of demand and price. We think we will be able to complete the year with very strong financials,” he said.
The company is currently running at more than 116 per cent capacity and is planning to produce 3.3 million tonnes of saleable steel this year.
Since we cannot stretch our production capacity, we need to expand capacity at the earliest to meet the market demand, he said.
VSP has embarked on a massive expansion project to raise its capacity from three million tonnes to 10 million tonnes in three phases over a period of 15 years at an investment of Rs 17,600 crore.
Mecon has been appointed consultant for the project.